Why the Case Against Cuban Smells Fishy

It’s a classic PR play: When you start to look like the bad guy, call out a bigger bad guy.

And it seems to be the strategy that the Securities and Exchange Commission–besieged by accusations of lax enforcement before and during the credit crisis–is using in going after Mark Cuban for insider trading.

It’s too early to say definitively whether Cuban is guilty of insider trading in Mamma.com (now called Copernic), a search also-ran whose management has, in Cuban’s own judgment, “a checkered past.” On his blog, the normally voluble Cuban simply accused the SEC of acting on “win-at-any-cost ambitions” and a process that “was result-oriented, fact be damned.” Still, it’s not looking good for him at all.

The SEC’s complaint against Cuban outlines some pretty compelling evidence: Cuban bought 6.3 percent of Mamma.com in March 2004. Three months later, the company CEO told him it was issuing a controversial, and heavily dilutive, private placement. “Well, now I’m screwed,” Cuban told Mamma’s CEO.

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